6. Brazil

Brazil is a competitive agricultural exporter, reflected in its relatively high levels of exports and low levels of support and protection to the sector. Producer support as a share of gross farm receipts (PSE) fell from 7.6% in 2000-02 to 2.3% in 2019-21. Over the past five years, PSE fell both in nominal terms and as a percentage of gross farm receipts, however that trend reversed in 2021 when PSE rose due to an increase in market price support (MPS). Nevertheless, domestic prices almost fully align with international markets with a ratio of producer to border price (NPC) just above one. Support to producers also comes through input payments, in particular credit at preferential rates, and crop insurance. Concessional credit is available for farm marketing and working capital, but also for fixed capital investment.

The highest rates of single commodity transfer (SCT) go to maize, wheat, rice, and cotton. These products have experienced an increase in support from 2020 to 2021 due to increases in domestic producer prices via MPS for these crops, particularly maize. Since 2008, all support based on input use – mainly credit and insurance – is conditional on environmental criteria and specific farming practices.

Around 90% of support to general services (GSSE) goes to agricultural research and development (R&D), technology transfer and extension services. However, expenditure on GSSE fell from 3.4% of agricultural value of production in 2000-02 to 1% in 2019-21, indicating that expenditures have not kept pace with the sector’s growth. As a percentage of GDP, the TSE declined from 0.7% in 2000-02 to 0.4% in 2019-21.

The Ministry of Agriculture (MAPA) releases its Agricultural and Livestock Plan (PSA) every year. The plan defines the maximum resources and guidelines for policy instruments: (1) rural credit, (2) agricultural insurance, (3) commercialisation support, (4) the zoning programme, and (5) the minimum and reference prices for each production year. For the 2021-22 harvest, credit allocation was BRL 251.2 billion (USD 46.6 billion), an increase of 6.3% compared to 2020-21.

Resources for the ABC programme, which is part of the National Low Carbon Agriculture Plan (ABC Plan), doubled from BRL 2.5 billion in 2020 to BRL 5 billion (USD 927 million) in 2021. The ABC programme in 2021 created a credit line for bio-inputs and bio-fertilisers, renewable energy systems, and power generation from biogas and bio-methane. In 2021, PRONAF (the main smallholders’ programme) incorporated a new credit line called Bio-Economia dedicated to agroforestry systems, bio-input production and rural tourism. At the same time, preferential interest rates for all agricultural credits increased between 2 and 4 percentage points. Rural insurance subsidies (PSR), which cover around 150 million hectares, increased by 34% between 2020-21 and 2021-22, from BRL 881 million to BRL 1.18 billion (USD 219 million).

In 2021, Agricultural Risk Zoning (ZARC) continued with the implementation of ZARC 4.0, which integrates various technical risk data: agro-climatic, management, soils and indications of productivity losses. Thirty crops and production systems were reviewed by the ZARC by 2021. A digital platform (AGROMET) was launched by MAPA in 2021 that compiles meteorological information and facilitates online access to climate services related to agriculture.

  • Brazil’s Nationally Determined Contribution (NDC) commits to reduce greenhouse gas (GHG) emissions 50% compared to 2005 levels by 2030 and achieve a long-term objective of climate neutrality by 2050. These economy-wide mitigation targets are not sector-specific. Since 2010, the country started incorporating agricultural, forestry and land use policies that contribute to climate change mitigation and adaptation. Sector-specific targets could help accelerate the low-carbon transition of agriculture, forestry and other land use (AFOLU) sector, and provide mitigation goals to measure progress. This is key given the important contribution of this sector in national GHG emissions equivalent to 43%.

  • Agricultural credit at preferential interest rates represents a significant share of agricultural support in Brazil. The National Rural Credit System (NRCS) is based on compulsory quotas of bank deposits dedicated to rural credit. Reform of the concessional credit system could consider downsizing concessional loans for working capital to commercial farms. Simplified regulations and procedures for commercial credit could facilitate access by rural borrowers.

  • Some credit programmes, such as Inovagro, Moderinfra and Moderagro, aim at innovation and technological modernisation of agricultural activities, contributing to increase productivity and may contribute to reduce emissions. Other credit lines for the financing of environmentally sustainable production systems are offered under PRONAF such as PRONAF-Agroecologia, PRONAF-Bioeconomia, FNE Verde, FNO Verde and FCO Verde. These credit programmes point in the right direction and can be improved and expanded. Moreover, the ABC Programme, which finances technological packages with a specific focus on mitigating emissions, is another step in the right direction, but only represents a small share of supported rural credit for achieving environmentally sustainable production systems and could be scaled-up.

  • Insurance and credit support are conditional on environmental criteria and zoning rules that promote environmental improvements, such as preservation of forest and native vegetation. The impact of environmental conditionality set by the Environmental Rural Registry (CAR), the Agricultural Risk Zoning (ZARC) and the Forestry Code must continue to be assessed with respect to outcomes such as targets related to deforestation and GHG emissions. This should remain as the basis for improving policy design for environmental conditionality, and specific programmes such as the ABC and initiatives against deforestation. Moreover, insurance subsidy programmes require monitoring and evaluation. It is essential to strengthen the information base for these programmes while ensuring efficient use of public funds, monitoring their impacts and ensuring they do not crowd out market solutions.

  • Budgetary support to GSSE is mostly invested in R&D, technology transfers and extension services. But these public outlays represent only 1% of the value of agricultural production. It is important to increase Brazil’s significant research and extension capacity, notably through the Brazilian Agricultural Research Corporation (EMBRAPA) and increase the diffusion of innovations to medium- and small-scale farmers.

Up to the 1990s Brazil had a history of government intervention in the agricultural sector. Price interventions were introduced in the 1940s amid food security concerns (OECD, 2015[1]; OECD, 2005[2]). From the 1950s, Brazil adopted an import-substitution industrialisation strategy, which involved wide-ranging controls over supply and prices in the agro-food sector. Prices were both supported for producers and subsidised to consumers.

The National Agency for Food Supplies (SUNAB) regulated distribution of basic foodstuffs and set prices and profit margins for all levels of the food chain, including low prices for consumers. This agency also controlled agro-food imports and exports. At the producer level, a general price support system existed for rice, maize, soybeans, beans, cassava, and cotton. Another government agency, the Company for Production Financing (CFP), carried out direct purchases of these commodities at minimum guaranteed prices. Marketing boards were created for wheat, sugar and coffee. They set overall production volumes, administered marketing quotas, and controlled prices and trade.

These policies continued until the late 1980s, when the government began to reform Brazil’s economy. The economy began restructuring in the 1990s: trade was liberalised, state owned enterprises privatised, domestic markets deregulated and a customs union established with other South American countries (Mercosur). Agricultural policies were no exception to this move towards openness and less state intervention. State enterprises related to agriculture were dismantled or their functions reduced. Agricultural import tariffs were substantially reduced. Export licensing for primary agricultural products was removed. Brazilian producers faced fewer controls and obtained freer access to world commodity and input markets.

Since the mid-2000s, policy emphasised support to smallholders, and minimum prices for staples produced in the poorest regions of the country were established. The government enhanced purchases of staple foods to be distributed to poor populations, and mandatory sugar cane ethanol fuel-blending continued to be imposed at ratios set by the State. The government also instituted the National Program for the Production and Use of Biodiesel in 2005. The blending of biodiesel with mineral diesel became mandatory in 2008. Currently, the percentage of blending can vary between 6% and 15%. Biodiesel is sold through public auctions, where preference is given to manufacturers that support family farming: they prioritise the acquisition of raw materials as well as offering technical assistance to this public. All of these measures remain in place (Table 6.2).

Brazil’s support to agricultural producers included market price support and input subsidies in the 2000s, up to 10% of gross farm receipts. Market price support has gradually disappeared. In recent years, total support in Brazil is mostly in the form of budgetary support, in particular for producers’ inputs and for the provision of general services. Consumer support is also an important part of support since the 2000s, particularly for vulnerable and poor populations. Brazil provides a relatively low aggregate level of support and protection to agriculture, reflecting its position as a competitive exporter and price maker for a range of commodities. Market price support is almost inexistent, and producer support is dominated by subsidised credit and insurance subsidies (Figure 6.4).

Agricultural policy emphasis has not changed over the past decade, and has been characterised by the provision of: 1) rural credit, developed since the 1960s; 2) risk management programmes including subsidised insurance programmes introduced in 2005; 3) some minimum and reference prices and marketing interventions (e.g. government purchases of food); and 4) agricultural land zoning with environmental compliance and promotion of biofuels. The annual Agricultural and Livestock Plan (PAP) administered by the Ministry of Agriculture, Livestock and Food Supply (MAPA) defines the key parameters of agricultural policy. Small-scale family agriculture policy is now also managed by MAPA under the Secretariat of Family Agriculture and Cooperativism and the Secretariat of Agricultural Policy. Family agriculture was previously managed by the special Ministry for Family Agriculture and Agrarian Development (MDA) directly under the Presidency. Lastly, a key public policy in agriculture has been on innovation, R&D and extension services provided by the Brazilian Agricultural Research Corporation (EMBRAPA), created in 1973.

Brazil’s agriculture has low price support overall. However, minimum guaranteed prices are used regionally, which cover a broad range of crops and a few livestock products such as cow and goat milk, and honey. These are set by the National Monetary Council (CMN) considering domestic and international prices, and the evolution of production costs in different locations. To secure these minimum guaranteed prices, the government implements several price support mechanisms on the domestic market, including direct government purchases (PAA programme), premiums to commercial buyers who pay minimum fixed prices to producers, and public and private options contracts backed by a private risk premium option. In addition, producers receive reduced-interest marketing loans, which enable them to withhold the sale of a product in anticipation of a higher market price. The National Food Supply Agency (CONAB) operates these programmes on behalf of MAPA. Several programmes offer deficiency payments calculated as the difference between the market price and the minimum (reference) price (e.g. the Rural Equity Prize programme called PEPRO, and the Product Reward Prize programme known as PEP).

One of the main agricultural policy instruments is credit at preferential interest rates provided to commercial, medium and small-scale family farms. It is designed and implemented in co-operation between the Central Bank, the Treasury, the Secretariat of Economic Policy (Ministry of the Economy) and the Ministry of Agriculture. Most rural credit is allocated under the National Rural Credit System (SNCR) and provided at preferential interest rates with differentiated conditions for small farmers (PRONAF) and medium size farmers (PRONAMP) compared to commercial farms. The main sources of preferential rural credit are Compulsory Resources or lending quotas, equivalent to around 25% of sight deposits in commercial banks and 59% of Rural Saving deposits, Constitutional Funds and loans from the National Bank for Economic and Social Development (BNDES).

Additional sources of preferential rural credit are the Coffee Fund (FUNCAFÉ) and the Agribusiness Credit Notes called LCAs (Letras de Crédito do Agronegócio). These are fixed-income securities backed by credit transactions linked to agribusiness, of which 32% have to be allocated to rural credit at zero interest rates. Some support is provided through debt rescheduling arrangements that are set to end by 2022.

Agricultural insurance support is either in the form of insurance premium subsidies or by compensating farmers for production losses due to natural disasters. Two programmes target commercial farmers: the rural insurance premium programme (PSR) grants insurance premium subsidies to commercial producers who establish contracts with insurance companies listed by the government; and the general agriculture insurance programme (PROAGRO) that offers farmers with a partial compensation that incur on investment losses when using working capital loans. Most resources from this programme are allocated to the southern region for grain crops, mainly soybeans. Small-scale family farms can benefit from two other programmes: the PROAGRO-Mais or family agriculture insurance (SEAF); and the crop guarantee programme in the north-east of the country (Garantía Safra, GS).

Rural credit and subsidies insurance programmes have to comply with environmental criteria defined by the Environmental Rural Registry (CAR) a mandatory digital registration. Working capital credit is conditional on agricultural zoning of climatic risks Agricultural Risk Zoning (ZARC), which links agricultural support to farming practices and activities adapted for the environmental sustainability of each geographical zone. Compliance with zoning is also required to access PROAGRO programmes. Rural environmental registration of geo-referenced information on rural property, including property perimeters, location of Permanent Preservation Areas, Legal Reserves, Restricted Use Areas, and areas of agricultural production is compulsory across the country since 2012.

Lastly, some agricultural tariffs were reduced to curb food price inflation; and a temporary suspension of non-Mercosur import tariffs was established on soybeans, soymeal and soy oil until 15 January 2021, and on maize until 31 March 2021. Import tariffs were previously 8% for maize and soybean, 6% for soymeal and 10% for soy oil.

Agriculture in Brazil is a significant contributor of GHG emissions. The sector contributed 43.3% of national GHG emissions in 2020 and 76% of methane emissions in 2016. Brazil’s NDC committed to reducing GHG emissions by 37% in 2025 and 50% in 2030 (i.e. 1.3 Gt CO2eq), compared to 2005 levels (i.e. 2.6 Gt CO2eq). This target includes emissions from land use, land use change and forestry (LULUCF), but no specific target relates to agriculture. Brazil’s NDC sets an indicative long-term objective of reaching climate neutrality by 2050.1 The country joined the Global Methane Pledge and agreed to take voluntary actions to reduce global methane emissions by at least 30% in 2030 from 2020 levels. Practical implications of these commitments at the sectoral level are not yet known as Brazil’s Long-Term Strategy remains to be submitted to the UNFCCC. Brazil also announced at COP26 it would end illegal deforestation by 2028.

Brazilian agricultural policies related to climate change, whether mitigation or adaptation, are embedded in the country’s agricultural policy instruments such as credit, insurance and zoning. For example, credit provided by PRONAF such as PRONAF-Agroecologia, PRONAF-Bioeconomia, FNE Verde, FNO Verde and FCO Verde, incorporate mitigation and adaptation features.

However, Brazil’s central initiative on mitigation in agriculture is the National Low Carbon Agriculture Plan (ABC Plan), which seeks to disseminate technologies that mitigate GHG emissions in agricultural production and promote adaptation to climate change. A key programme under this ABC Plan, with a strong environmental component on mitigation, is the Low Carbon Agricultural Programme (ABC Programme), providing credit to farmers for activities that reduce GHG emissions. The ABC Programme is subdivided into the following subprogrammes:

  • Recovery of degraded pastures (ABC Recovery)

  • Implementation and improvement of organic agricultural production systems (ABC Organic)

  • Implementation and improvement of no-tillage systems in straw (ABC No-Till)

  • Implement and improve crop-livestock, crop-forest, livestock-forest or crop-livestock-forest integration systems and agroforestry systems (ABC Integration)

  • Implementation, maintenance and improvement of commercial forest management, including those destined for industrial use or charcoal production (ABC Florestas)

  • Adequacy or regularisation of rural properties concerning environmental legislation (ABC Ambiental)

  • Implementation, maintenance and improvement of waste treatment systems and waste from animal production for energy generation and composting (ABC Waste Treatment)

  • Implantation, improvement and maintenance of oil palm forests, primarily in degraded productive areas (ABC Dendê)

  • Encouraging the use of Biological Nitrogen Fixation (BNF) (ABC Fixation)

  • Adoption of conservation practices for the use, management and protection of natural resources, including correction of soil acidity and fertility (ABC Soil Management)

  • Construction of facilities for implementing or expanding bio-input and bio-fertiliser production units for agricultural and rural use.

Other important elements related to the ABC Plan are the Nationally Appropriate Mitigation Actions (NAMAs) on: 1) restoration of degraded pasture; 2) integrated crop-livestock-forest systems and other modes of agroforestry systems; 3) soil conservation with the use of no-till farming; and 4) biological nitrogen fixation. The ABC Plan also takes into account two strategic actions: 1) planted forest or reforestation, and 2) animal waste management. During 2010-19, the ABC Plan estimated a reduction of 166 million tonnes of CO2 emissions. Lastly, since 2008, access to subsidised credit for agricultural production in the Amazon biome requires compliance with environmental regulations – in particular land use change regulations set out in the Forestry Code – with the aim of constraining land use change.

Climate change mitigation measures relate to production of biofuels, supported since the launch of the National Alcohol Programme (Pró-Álcool) and the Plan of Production of Vegetable Oils for Energy Purposes (Pró-Óleo) in 1975 with the idea of improving environmental performance and energy independence. The main tools are compulsory blending of gasoline and ethanol (mainly from sugar cane) and large-scale deployment of flex-fuel vehicles in the Brazilian car fleet. In addition, the National Programme for the Production and Use of Biodiesel (PNPB) from oilseeds launched in 2004 to offer a fuel alternative for heavy-duty vehicles. In 2017, the national policy initiative RenovaBio launched to foster the implementation of GHG emission reduction commitments under the Paris Agreement on Climate Change by increasing the supply of alternatives to fossil fuels.

Each year, MAPA releases its Agricultural and Livestock Plan (PSA). The plan defines the maximum resources and guidelines for main policy instruments: 1) rural credit; 2) agricultural insurance; 3) commercialisation support; 4) the zoning programme; and 5) the minimum and reference prices for each production year. For instance, for the 2021/22 harvest, total credit allocation was BRL 251.2 billion (USD 46.6 billion), an increase of 6.3% compared to the 2020/21 plan. The resources for investment credit represent 29.2% of the total, the rest being dedicated to working capital and commercialisation. Credit for small-scale farmers represents 15.6% (PRONAF) and for medium-size producers an additional 13.5% (PRONAMP), while 71% of the resources are dedicated to large scale producers.

For 2021/22, the available resources for the ABC Program doubled from BRL 2.5 billion in 2020 to BRL 5 billion (USD 927 million). In 2021, the ABC programme created new credit lines for bio-inputs and bio-fertilisers, removable energy systems, and power generation from biogas and bio-methane. PRONAF incorporated in 2021/22 a new credit line called Bio-Economia dedicated to Agroforestry systems, bio-inputs production, and rural tourism. Overall preferential interest rates of all agricultural credits increased from the 2020/21 to the 2021/22 harvest. For example, the PRONAF interest rate increased from 4% to 4.5%, PRONAMP from 5% to 5.5% and of the remaining credits from 6% to 7.5% or 8%.

Rural insurance subsidies (PSR) increased by 34% between 2020/21 and 2021/22, from BRL 881 million to BRL 1.18 billion (USD 219 million). This subsidy covers approximately 150 million hectares, benefiting 121 000 producers. Around BRL 53 million (USD 10 million) of this subsidy was reserved for the poor and isolated north and northeast regions.

Support for commercialisation for the 2021/22 harvest amounted to BRL 2.4 billion (USD 445 million), of which BRL 342 million (USD 64.4 million) was for private stock formation, BRL 630 million (USD 117 million) for price stabilisation, and BRL 1.4 billion (USD 260 million) for public stocks. The Minimum Price Policy (PGPM) for the 2021/22 harvest defined 27 products of regional and national production that include main grains, as well as 17 exotic products for the domestic market. In 2021, the PAA programme reached 31 000 farmers, of which 74% were women.

In 2021, the Agricultural Risk Zoning (ZARC) continued with the implementation of “ZARC 4.0” that integrates various technical risk data - agro-climatic, management, soils and indications of productivity losses. MAPA, EMBRAPA and the Central Bank signed an agreement providing funds for research on the ZARC programme, with the objective of expanding harvested areas and production systems in the country through new zoning. These funds also aim at modernising the information collection and methods to determine the most suitable planting periods, and minimising the risks related to adverse climatic events. By 2021, 30 crops and production systems were reviewed by the ZARC.

A digital platform (AGROMET) was also launched by MAPA in 2021 that compiles meteorological information and facilitates online access to different climate services related to agriculture. The Territorial Governance Platform (PGT) was also launched, which enables the integration of land registries aiming at reducing red tape. Moreover, 46 agricultural services became digital in 2021, including the service delivering International Veterinary Certificate for Brazilian trade partners such as Japan, Colombia, Canada, and Mexico, among others.

In 2020 and 2021, the country provided a stimulus package of BRL 1.2 trillion (USD 233.8 billion) which then increased to BRL 3 trillion (USD 556.2 billion). The package included support for workers and the most vulnerable population, aids to states and municipalities, credit measures, keeping employment in companies and fighting the pandemic disease. MAPA and the Ministry of Economy established a debt rescheduling and renegotiation of rural credit, which were implemented in 2020 and 2021. Specific measures were also put in place in 2020 and 2021 for the most vulnerable population, including farm households: a temporary transfer of a monthly allowance to unemployed and informal workers and the reinforcement of a cash transfer under the Family Aid Program (Bolsa Família).

The European Union and Mercosur free trade agreement involving EU Member States and the members of Mercosur (Argentina, Brazil, Paraguay and Uruguay) continues with its legal revision and public debate for its approval by the Parliaments of the European Union, its Member States and Mercosur countries.

Brazil is one of the ten biggest economies of the world and it is the largest country in Latin America in terms of area and population. The country’s population accounts for 4.1% of the population of countries covered in this report. It has abundant land and water resources and is a major agricultural producer and exporter. The share of agriculture in Brazil’s GDP increased from 5.5% in 2000 to 5.9% in 2020, while its share in employment decreased from 16.5% to 9.1% during the same time period. These shares remain higher than in most other countries covered in this report. Agro-food exports have grown in importance for Brazil, representing 41.7% of its total exports in 2020. Arable land accounts for 24% of Brazilian agricultural land.

Brazil is among the world’s leaders in the production of soybeans, poultry, beef, cotton, corn, and orange juice, being the third biggest exporter of agro-food products after the European Union and the United States. Two-thirds of the total value of agricultural production are crop products, and one-third livestock products. The main product in Brazilian exports is soybeans (grain, meal, and oil), which represent almost 50% of the agro-food exports.

After the recession in 2015 and 2016, Brazilian GDP grew moderately at just below 2% between 2017 and 2019. The economy shrank by 4% in 2020 during the COVID-19 crisis but rebounded in 2021, and grew by 5%. At the same time, inflation has increased above 8% and unemployment reached 14%.

Agro-food exports in Brazil have exceeded USD 80 billion per year since 2017, generating an annual agro-food trade surplus of more than USD 76.5 billion in 2020. Around 53% of Brazilian agro-food exports are primary products for industry (including soybeans), and more than 61% of the country’s imports are processed products.

Between 2010 and 2019, Brazilian agricultural production increased at an annual rate of 2.3%, slightly above the world average. Increases in production were driven Total Factor Productivity (TFP) growth of 2.3% per year, well above the global average, while increased use of intermediary inputs was offset by the declining use of primary factors in agricultural production.

Agriculture accounted for 43.3% of GHG emissions in 2020, which is below the level observed in 2000, but still well above the OECD average. The use of energy by the agricultural sector has increased up to 5.6% of total use in 2020, also above the OECD average. The larger share of the agricultural sector in the Brazilian economy and the importance of pasture-based livestock contribute to these outcomes. Even though the agriculture’s share of water abstractions remained high at 58.1%, water stress is low. Nutrient surpluses in Brazil have increased since 2000, and the phosphorous balance is more than five times the OECD average.

References

[1] OECD (2015), Innovation, Agricultural Productivity and Sustainability in Brazil, OECD Food and Agricultural Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264237056-en.

[2] OECD (2005), OECD Review of Agricultural Policies: Brazil 2005, OECD Review of Agricultural Policies, OECD Publishing, Paris, https://doi.org/10.1787/9789264012554-en.

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